Unlike many states, Illinois lets even the smallest cities and villages take massive gambles with millions in loans -- leaving taxpayers on the hook

Bassam Shaheen, owner of Sam's Auto Service in Bellwood, has a property tax bill posted in his shop. Bellwood's borrowing for a redevelopment plan that faltered when the real estate market crashed, is partially to blame for the village's estimated $99 million debt. (Keri Wiginton, Chicago Tribune)

Just above the cash register at Sam's Auto Service, the owner has taped up a photo of his elderly father, a snapshot of his granddaughter and his property tax bills.

Owner Bassam Shaheen knows it may seem odd to tape up an old $53,000 annual tax bill. But he wants to show customers why his west suburban shop struggles to break even.

"Some people complain and say, 'Why is the (repair) bill so high?' I say, 'Here, look at the high taxes,'" Shaheen said.

His tax bill is the costly ramification of Illinois' largely hands-off approach to municipal debt — rules that are among the loosest in the nation.

A Tribune investigation found that the inner-ring suburb of Bellwood — littered with vacant storefronts and crumbling factories — now has among the highest municipal tax rates in the county while still drowning in debt.

Local officials boosted taxes while gambling tens of millions of borrowed dollars on failed real estate ventures tainted by insider dealings and allegations of misconduct.

The borrowing and gambling was completely legal — at least in Illinois.

Bellwood's fallout offers a cautionary example of how local politicians can amass enormous power unseen in many states — power that can be used to benefit the politically connected,nearly bankrupt towns and stick a generation with IOUs for which they had no direct say.

That's because Illinois law allows even the smallest of towns to tax, spend and borrow like the biggest of cities. Municipal advocates insist that home-rule power has largely improved towns, but the Tribune found suburb after suburb has gone deep in the hole over projects ranging from buying a roller rink to building condos— ventures far beyond the basics of building roads and sewers.

Tribune investigations this summer highlighted how Bridgeview residents must now heavily subsidize a $100 million-plus soccer stadium that enriches campaign contributors and how Rosemont's massive entertainment venues, built through debt, benefit insiders' friends and family.

In Bellwood, the cash infusion funded a real estate buying spree that involved more than 60 properties — from massive warehouses to deteriorating storefronts and homes. The easy money also fueled lavish contracts and high salaries for town officials overseeing a small, working-class suburb of mostly modest bungalows.

When the real estate market tanked and development plans evaporated, the town was stuck with $100 million in debt, a third of it in dangerous balloon-payment loans that left Bellwood at the mercy of banks to give the suburb more time to pay.

The village's tax rate is now so high it consumes close to half of the property tax bill there, fattening everyone's bills in the process, unlike most cities and villages that take a thin slice of the tax bill. The town also imposes the highest sales tax rate in the state — ensuring a hefty cut from shoppers too.

As the suburb's 19,200 residents struggle to help pay the tab, they are treated to a political sideshow and finger-pointing.

Three-term Mayor Frank Pasquale oversaw the borrowing and spending, but now he says two trusted advisers misled him or let him down. One was recently indicted for allegedly inflating his village pay, and the other was convicted of unrelated tax fraud.

Pasquale, who is paid $95,000 a year, declined to talk to reporters about the mess in his town, instead referring questions to his new staff.

Current village officials say they've done their best to right the ship. They've slashed budgets, slightly cut taxes this year and hope to refinance the debt in ways to avoid more tax hikes.But for local taxpayers, the damage is done.

Shaheen's tax bill dropped to $48,000 this year because his property value fell so sharply, but that still was not enough to undo years of hikes that he said forced him to cut staff and raise prices.

"I'm fed up with it," he said.

Those who study town finances say suburbs such as Bellwood risk taxing themselves into an irreversible cycle of decline — chasing out tax-weary residents and businesses as the bills pile up. Home values are already dropping more in Bellwood than nearly any other near west suburb.

Critics say Illinois' loose rules invite those dangerous conditions by eliminating fundamental checks and balances: Those borrowing the money — residents — may have little chance to vet the plans. And those lending the money — investors — may care little about the details, so long as the town leaders agree to boost taxes as high as needed to pay off the debt.

That's why Robert Bland, a Texas professor who studies and writes books on town finances, said Illinois shouldn't be allowing cities and villages to take such high-risk development gambles that, if they fall flat, would "basically steal the dignity of citizens in these communities and their economic well-being."

Free reign

Such power can be traced to a 1970 sea change in how Illinois oversaw its towns.